Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies On November 5, 2015, Peter Kravitz, as Liquidating Trustee of the RSH Liquidating Trust, filed a complaint against the Company in the U.S. States Bankruptcy Court for the District Court of Delaware alleging payments received by the Company were preferential payments and seeking the return of approximately $4.0 million in payments. The Company operated under a consignment relationship with the former Radio Shack entity. Therefore, the Company believes the payments received are not considered preferential and intends to vigorously defend this action. On February 12, 2016, an alleged shareholder filed a putative securities class action complaint against the Company and certain Company officers and directors in the United States District Court for the District of Utah, captioned Davis v. Skullcandy, Inc., et al., No. 2:16-cv-00121-RJS. The complaint purports to be brought on behalf of shareholders who purchased common stock between August 7, 2015 and January 11, 2016. It asserts that the Company and certain officers and directors violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making allegedly false or misleading statements concerning positioning and expectations for future growth. The complaint seeks damages in an unspecified amount and equitable relief against the defendants. On March 28, 2016, an alleged shareholder filed a substantially similar putative securities class action complaint in the United States District Court for the District of Utah, captioned Oswald v. Skullcandy, Inc., et al., No. 2:16-cv-00246-CW. The Oswald Complaint purports to be brought on behalf of shareholders who purchased common stock between May 5, 2015 and January 11, 2016. The court has consolidated the two lawsuits. On May 2, 2016, an alleged shareholder filed a derivative lawsuit in the Third Judicial District Court Summit County, Utah: Bessey v. Darling, et al., No. 160500199. The lawsuit is purportedly brought on behalf of the Company against Hoby Darling, Jason Hodell, Richard Alden, Doug Collier, Greg Warnock, Jeff Kearl, Scott Olivet, Heidi O’Neill, and Jay Brown. The lawsuit alleges claims for breach of fiduciary duty, waste of corporate assets, and unjust enrichment. In addition to damages sustained by the Company, restitution, and disgorgement of profits, the complaint seeks equitable relief restricting the proceeds of the defendants’ trading activities or other assets and select corporate governance reforms. Following the announcement of the Offer and proposed Merger, two alleged shareholders filed putative securities class action complaints against the Company and certain of its officers and directors in the United States District Court for the District of Utah: Paprakis v. Skullcandy, Inc., et al., No. 2:16-cv-00810-BCW (filed July 19, 2016); Bernicke v. Darling, et al., No. 2:16-cv-00831-DN (filed July 26, 2016) (together, the “M&A Securities Actions”). The M&A Securities Actions assert that the Company and certain of its officers and directors violated sections 14(e), 14(d)(4), and 20(a) of the Securities Exchange Act of 1934, as amended, by forcing a sale of the Company to Parent and Purchaser at an unfair price and by providing incomplete and misleading disclosures regarding the Offer and proposed Merger. The Bernicke complaint also alleges that the proposed Merger is the result of preclusive deal protection devices and self-interested decisions made by the Company’s officers and directors. The M&A Securities Actions seek to enjoin the Offer and any steps taken to consummate the Merger, as well as damages in the event that the Merger is consummated. The Company is also subject to other various claims, complaints and legal actions in the normal course of business. The Company does not believe it has any currently pending litigation of which the outcome will have a material adverse effect on its operations or financial position. |